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Statistical inference using the T index to quantify the level of comparability between accounts

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  • Ross Taplin

Abstract

The extent to which the accounts of companies are comparable is considered important to users and regulators. However, prior research has been restricted by a lack of appropriate statistical methods for testing comparability indices. This has made it difficult to assess the true level of comparability from sample data and to test research hypotheses such as whether the level of comparability (a) differs by policy, (b) differs by country, and (c) changes over time. This paper fills this gap by exploring the statistical properties of the T index. The T index generalises the H, C, I and various modifications of these indices and represents a unified framework for the measurement of the extent to which the accounts of companies are comparable. Formulae for the bias and standard error for any index under this framework are provided and proved. The bias is shown to equal zero or be negligible in most practical situations. Using historical data, the standard error is used to illustrate the accuracy with which comparability is estimated and to perform formal statistical inference using confidence intervals and p‐values. Furthermore, the sampling distribution of the T index is assessed for normality. Implications for research design and sample size determination are also discussed.

Suggested Citation

  • Ross Taplin, 2010. "Statistical inference using the T index to quantify the level of comparability between accounts," Accounting and Business Research, Taylor & Francis Journals, vol. 40(1), pages 75-103.
    • Handle: RePEc:taf:acctbr:v:40:y:2010:i:1:p:75-103
    DOI: 10.1080/00014788.2010.9663385
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    References listed on IDEAS

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    1. Aziz Jaafar & Stuart McLeay, 2007. "Country Effects and Sector Effects on the Harmonization of Accounting Policy Choice," Abacus, Accounting Foundation, University of Sydney, vol. 43(2), pages 156-189, June.
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    1. Gordon, Elizabeth A. & Gotti, Giorgio & Ho, Joanna H. & Mora, Araceli & Morris, Richard D., 2019. "Commentary: Where is International Accounting Research Going? Issues Needing Further Investigation," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 37(C).
    2. Ross H. Taplin, 2017. "Measuring the Comparability of Company Accounts Conditionally: A Research Note," Abacus, Accounting Foundation, University of Sydney, vol. 53(4), pages 527-542, December.
    3. Cairns, David & Massoudi, Dianne & Taplin, Ross & Tarca, Ann, 2011. "IFRS fair value measurement and accounting policy choice in the United Kingdom and Australia," The British Accounting Review, Elsevier, vol. 43(1), pages 1-21.
    4. Federica Doni & Ross Taplin & Roberto Verona, 2016. "Comparability of Company Accounts Using IFRS and US GAAP: Empirical Evidence of European and US Financial Statements," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(12), pages 1-54, November.

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